Dublin, Ireland — Birch lashes used to be how the Isle of Man punished misdemeanors, but 16 years after the island repealed its “birching” law, it is dealing with the crime of Internet piracy in an equally novel way: by accepting defeat.

Rather than police the Internet for illegal activity, the Isle of Man has proposed a radical new tax of £1 ($1.45) per week that will be paid directly to recording companies to allow its citizens unlimited downloads of music.

Meanwhile, across the Irish Sea, record companies in Ireland have reached a landmark agreement with the country’s largest Internet service provider in the battle against piracy. Customers found guilty of illegal downloading now face the ultimate horror: disconnection from the Internet.

Ireland and the Isle of Man might be just 50 miles apart, but their strategies for dealing with illegal downloading represent polar opposites within the record industry. The experiments taking place on these two islands are being watched closely, with the results likely to influence public policy far beyond this rainy, wind-swept corner of Europe.

The music industry is desperate for a solution: Global music sales are down a quarter since 2000 and the vast majority of music distributed on the Internet is now pirated, according to the recording industry’s leading trade group.

The Isle of Man’s approachA small island of 80,000 people between Ireland and Britain, the Isle of Man has been self-governing for over 1,000 years, with the oldest continuous parliament in the world. Queen Elizabeth II (known as the “Lord of Mann”) may be the official figurehead, but the island isn’t part of the United Kingdom or the European Union.

This political and economic independence – and 100 percent broadband penetration – makes it an ideal testing site for an ideology that is spreading within the record industry: Don’t try to stop people stealing music, just try to find ways to make them pay for it.

“The logic is quite straightforward: You find a way of creating a payment within the network,” says Gerd Leonhard, a media futurist and author.

Although a similar idea failed in France in 2006 amid a fierce lobbying effort by the recording industry, Mr. Leonhard has long argued that if the recording industry licensed Internet networks with a flatrate for streaming and downloading music, then advertising and other subsidies would be able to cover the entire CD business. He doesn’t even think the Isle of Man’s tax is necessary.

“The payment of about €1 [$1.28] per week, which we have been debating in Europe as a flat rate, is entirely possible to raise through the ecosystem. The music won’t be free, but it will feel like free,” he says, in an interview from Austria.Business models like Leonhard’s are becoming more feasible as concert tours, merchandise, and endorsements become more lucrative than recordings.

“When Prince gives away his CD away with a British Sunday newspaper, he knows that he will be guaranteed three sold-out shows. That is worth more to him than the recording,” Leonhard says.

Ron Berry, e-business inward investment adviser for the Isle of Man, announced the proposal in January at MIDEM, the world’s largest music industry trade fair. The approach might be innovative, but it’s not a panacea, he said.

“At the end of the day, we’re not going to stop piracy,” Mr. Berry said.

In Ireland, a new crackdownFor some, the battle against piracy is still worth pursuing.

“There is now a whole generation who have never paid for music,” says Willie Kavanagh, chairman of the Irish Recorded Music Association and managing director of EMI Ireland, one of the four companies that recently sued the Internet service provider Eircom. “We’ve done research in classrooms and it’s astounding how young people of 17 have never bought a CD. Not only that, none of them had ever paid for music. So the problem is of total epidemic proportions.”

The settlement means that Eircom will disconnect customers if they ignore two warnings. Paul Bradley, head of communications at Eircom, says that his company won’t directly monitor customers’ Internet usage. The record companies, via a third party, will supply Eircom with the IP addresses of all persons they detect to be illegally trading copyrighted works on a peer-to-peer (P2P) basis. Once Eircom is made aware of illegal activity it is bound by law to take action.

The Irish model may be one of the first, but it is likely to be copied. The British government has recommended similar measures in its Digital Britain Interim Report, published on Jan. 29. France, after rejecting an approach similar to the Isle of Man’s, now supports the idea of disconnecting Internet pirates.

Attempting to stop the vast (and largely free) global flow of music file sharing through punishment will ultimately prove futile, predicts Bob Lefsetz, a leading music industry analyst based in California.

“This three-strikes thing is not a solution,” Mr. Lefsetz says. “Licensing is a solution. The Isle of Man [model] is a solution.”

The future is in on-demand services, Lefsetz says. The record industry should be looking ahead to those challenges.“Do you still think that eight years from now people are going to be stealing music track by track?” Mr. Lefsetz says. “The bottom line is you are going to have instant delivery of everything you want, whenever you want. P2P is already antiquated.”

Careful number-crunching is needed to ensure the recording companies and artists are adequately compensated, says Mr. Kavanagh, of the Irish Recorded Music Association. “At some point, all-you-can-eat loses money for somebody.”Author and futurist Leonhard says the recording industry is fighting an uphill battle: “The tactic of criminalizing users hasn’t produced any money. The industry needs to look for compensation, not control.”